Alzheimer's disease (AD) is a major public health problem and there is an urgent need for more effective therapies. Activation of the brain's microglial immune cells and subsequent inflammatory processes are now recognized as playing an important role in the progression of AD. Laboratory evidence strongly suggests that agonists of Peroxisome Proliferator Activated Receptor-gamma (PPARgamma) act to downregulate the transduction of inflammatory signals in microglia exposed to AD-related amyloid peptide. Therefore, agents that activate PPARgamma have great potential for reducing the progressive neuronal loss in AD. Drugs of the thiazolidinedione class, developed to reduce insulin resistance in type II diabetes mellitus have significant PPARgamma activation, suggesting that they may be useful for treating AD progression. Of this class, the most favorable clinical experience and safety profile exists for pioglitazone (PGZ). This application proposes a double-blind, placebo controlled, parallel group, pilot study to determine the safety and tolerability of PGZ in patients with AD. Another goal of the study is assess how clinical measures might demonstrate sensitivity to the potential effect of PGZ in slowing AD progression. Since there are no prior data for PGZ effects in AD, efficacy measures from this pilot will be used primarily to inform effect-size determinations for future studies. Thirty patients diagnosed with probable AD by NINCDS-ADRDA criteria, at a mild or moderate level of severity (CDR = 1-2) will be enrolled. One-half of the subjects will be randomized to receive PGZ at the best tolerated dose of 15, 30, or 45mg daily; the others will receive placebo. All subjects will take Vitamin E 200mg daily. Subjects will be followed for safety and tolerability at monthly intervals for 1 year, then again at 15 and 18 months. All adverse events will be recorded and compared between treatment groups. Human subjects' safety will monitored by an independent and unblinded safety committee. Efficacy measures will be the Alzheimer's Disease Assessment Scale- cognitive score (ADAS-cog), the Clinical Dementia Rating-Sum of Boxes score (CDR-SB), and the Clinician's Interview-based Impression of Change (CIBIC-Plus). Secondary measures will include the Neuropsychiatric Inventory, Nurse's Observation Scale for Geriatrics (NOSGER) and the ADFACS scale for activities of daily living. Comparison of mean differences (using last observation carried forward imputation techniques) and survival analyses will be employed to assess for group differences in clinical measures AD of progression.